Misadventures in Risk Management

| While A.I.G. continues to dominate the news, it’s worth reading this 2002 Economist article, which cast doubt on the insurance giant’s early forays into the derivatives market. Back then, A.I.G. argued that “derivatives play an important part in reducing the company’s overall risk.” By 2009, those same investments had left the company so badly damaged that it posed a risk to the entire financial system. Talk about unintended consequences. [%comments]


Caliphilosopher

Or, talk about not having any sort of check on arrogance. Especially when put in such a well-respected periodical.

Ben

I bet it really reads "shift the risk", but given the current state of things, your paraphrase seems more appropriate.

brian t

"AIG has a stockmarket valuation of $190 billion, making it second among financial companies only to Citigroup's $225 billion"

AIG's market cap. today: $3.74 billion. Citigroup: $16.59 billion. Ouch.

Lee

Sometimes it helps to look at the current crisis in a different perspective.

http://www.newleftreview.org/?page=article&view=2759

The nature of the beast has evolved so the way to tame it will take a different set of rules and strategies. Still the current proposed solutions do not address the fact that financial firms are so diverse and operate outside the US regulatory controls. Without cooperation from tax havens and other financial centers, the rescue or bailout will be ineffective.

econobiker

I still reserve my hate for A.I.G.'s synthetic coal tax credit boondoggle:

http://www.time.com/time/magazine/article/0,9171,1167738,00.html

Though now I am finding humor in the online black helicopter and tin foil hat sector folks who are now linking AIG with world wide drug sales, NYC World Trade Center terrorist attacks, the one world order etc... nuk, nuk, nuk.